The Emperor Has No Clothes
Monday, 30 September 2013
The Fed’s latest antics, that being not tapering its ongoing QE program, has exposed itself to have no clothes, despite they will never admit this and continue the ruse tapering remains a possibility until it becomes embarrassingly obvious such an outcome is an impossibility in their increasingly fragile fiat currency economy. (i.e. they cannot stop printing increasing currency idefinitely.) But the Fed should already be embarrassed not tapering after the build-up since spring, but because so many now depend on the stock market, they need to believe the Fed can continue its magic. And as long as stocks continue going higher they will. So, the mainstream media and majority of traders, even the ones that were fully hedged going into Wednesday’s meeting, have already minimized this embarrassing episode, although one would think they may not repeat such behavior the next time the Fed ‘cries wolf’. (i.e. their bullshit [BS] story.)
But this might not be the outcome, because despite the above, the Fed has also increased the level of anxiety in the market with this move as well, meaning some will view the need to hedge has increased, if not for the right reasons, for the wrong. And sure enough, the next day, key index and ETF open interest put / call ratios were in fact higher, supporting this view; however the ratios have definitely collapsed post expiry on Friday, as can be seen here in updated charts, which I will get into further detail on below. Add to this performance chasing hedge fund managers (because they are under-performing) and the public alike, who have both been holding back on stocks because of a perceived taper risk, might be drawn back into the market as year end approaches, possibly causing a melt-up like it was1999.